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Salesforce forecasts second quarter revenue, profit below estimates on soft cloud demand

Firm’s forecast indicates that clients are scaling back spending

Salesforce's forecast indicates that clients are scaling back spending as the possibility of higher-for-longer interest rates and elevated inflation prompt them to keep a tight leash on costs. Photograph: Barry Cronin for The irish Times.

Wed May 29 2024 - 21:56

Salesforce forecast second-quarter profit and revenue below Wall Street estimates on Wednesday due to weak client spending on its cloud and enterprise business products, sending its shares down more than 16 per cent after the bell.

The company expects revenue between $9.20 billion (€8.5 billion) and $9.25 billion compared with estimates of $9.37 billion, according to LSEG data.

Salesforce's forecast indicates that clients are scaling back spending as the possibility of higher-for-longer interest rates and elevated inflation prompt them to keep a tight leash on costs.

For the first quarter, the company reported revenue of $9.13 billion, missing the analysts' average estimate of $9.18 billion.

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The result also contrasts with a strong quarter from cloud giants like Amazon and Microsoft, as they benefited from higher customer spending.

However, Salesforce's first-quarter adjusted earnings per share jumped 44 per cent to $2.44, higher than analysts' estimate of $2.38.

The company has used its large cash pile for acquisitions, but a push for management changes by activist investors resulted in increased share buybacks, focus on profit and a dismantled mergers and acquisitions committee.

The company has been heavily investing in AI for months and integrating the technology into the workflows of its large suite of products to drive revenue and margins.

The company left its full-year revenue forecast unchanged, but cut its operating margin expectations to 19.9 per cent from its prior forecast of around 20.4 per cent for fiscal 2025.

For the second quarter, Salesforce expects adjusted EPS between $2.34 to $2.36 per share, compared with estimates of $2.40. --Reuters

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